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Bank of America predicts that unemployment will rise to 5.6 percent by the end of next year.
Research from the U.S. economics team led by Michael Gapen said that the bank increased its prediction after the Federal Reserve officials said that the central bank’s interest rate could reach 5% next year.
The research note also stated that the steeper path and higher peak for interest rates make a “hard(er) landing.”
The bank had already predicted an increase of 5% by the year-end of 2023, and given this new prediction, it would be a total increase of 12%.
Unemployment has been rising since March reaching the highest number of 3.7 in August.
Bank of America wrote, “The Fed’s actions suggest to us that it is committed to reducing inflation, and it appears willing to accept some deterioration in labor market conditions.”
More on history via Breitbart:
The bank expects GDP to fall to one percent in the four quarters of 2023. The bank thinks the Fed will raise its target range for the Federal Funds rate to 4.75 to 5.0 percent.
A rapid rise in unemployment—such as the nearly two hundred basis point hike forecast by Bank of America—is often considered a marker of a recession.
The Sahm Rule, named for economist Claudia Sahm, says a recession has begun when the three-month moving average of the national unemployment rate rises by 0.50 percentage points or more relative to its low during the previous 12 months. If Bank of America’s forecast is correct, the U.S. will be in a Sahm Rule recession sometime next year.
